Providers of benefits administration outsourcing services are scrambling to help employers comply with upcoming tax reporting requirements of the Patient Protection and Affordable Care Act, but few can transmit that information directly to the IRS.
While some human resources information system providers can perform services such as tax filing in addition to benefits administration and payroll processing, systems built solely to perform health and welfare benefits administration historically have not had such capabilities, experts say.
Some providers are retooling to meet the new ACA reporting requirements, while others are partnering with firms that already have tax-reporting capabilities.
JoAnne Pettijohn, a Dallas-based solutions consultant in Lockton Cos. L.L.C.'s human resource technology outsourcing practice, said while most benefit administration outsourcing pro-viders “can help employers gather the data and help prepare the reports, the filing is going to be the difficult component.”
“Currently, the only choice is to prepare the report with all the integral data and then deliver it to the client so the employer can file it with their tax filing, but there is no electronic interface at this point,” Ms. Pettijohn said.
“There are a lot of stand-alone ACA technology vendors that have come to the rescue, but they're not benefit administration vendors,” she said. “A lot of benefit administration vendors are partnering with these stand-alone ACA vendors, but a stand-alone benefit administration vendor may not have these capabilities.”
Mercer L.L.C. recently introduced its Employer Shared Responsibility software that can accept data feeds from payroll systems to track hours and report who has met the 30-hour threshold for benefits eligibility, said Kerry Donoghue, Norwood, Massachusetts-based partner and health and benefits administration business leader at Mercer.
“We can feed a file to their payroll vendor or another third party, but there's not the ability for us right now to do a tax filing,” Ms. Donoghue said. “We do something similar with the W-2 reporting.”
Using Mercer's benefit administration outsourcing systems for tax reporting “would require us to do additional coding,” she said. “We also would have to do additional work with the IRS from a licensing perspective.”
Similarly, Aon Hewitt provides “data files to support the filing requirement, as much of this information is on file as part of the benefits administration services we provide,” said Craig Rosenberg, the consultant's Norwalk, Connecticut-based health and welfare benefits administration practice leader.
The files must include demographic, enrollment, cost and other information.
“We are currently working through the approach related to the actual IRS filing and creation of tax forms,” he said, but U.S. Treasury Department guidance must be issued first. “Draft forms have been released, but filing instructions have not yet been provided.”
Tony DeNucci, managing director of benefits outsourcing at Towers Watson & Co. in Minneapolis, said clients are asking for help with the Internal Revenue Code 6055 and 6056 reporting requirements on health insurance offered, which go into effect for the 2015 tax year.
“That is something that we can help clients with, but we do have to modify our processes,” Mr. DeNucci said. “Under our traditional outsourcing agreement, it was not something we were contracted to do.”
Charleston, South Carolina-based Benefitfocus Inc. announced a joint venture last fall with Equifax Workforce Solutions, a unit of Equifax Inc., to provide administration and reporting tools to determine benefit eligibility for part-time and seasonal employees, said Shandon Fowler, director of product management for marketplaces at Benefitfocus.
“This was something that caught everybody off guard,” he said. “It was something that hadn't been done before. One of the reasons that Treasury delayed the reporting requirements was because there weren't any current systems capable of doing it.”
Perhaps the biggest reason so many outside providers of benefits administration are ill-equipped to perform this new reporting task is that “this is tax reporting, not benefits administration,” said Ray Grove, product marketing manager at Convey Compliance Systems L.L.C., a nonwage third-party tax information reporting provider based in Minnetonka, Minnesota. “One of the things that the ACA has done is to complicate things for employers. This is very much a tax process; it just has to do with health care.”
But “even if an employer were to use a stand-alone outsourced ACA administrator, they are still going to be dependent on eligibility and enrollment data from their benefits outsourcing vendor,” said Bruce Gillis, health and wellness practice lead at Xerox Corp. in Louisville, Kentucky. “The system of record is clearly going to be the health and welfare benefits administration system.”